Corporate and non-corporate assessee
In India, the term “assessee” refers to an individual or entity that is legally liable to pay income tax under the Income Tax Act, 1961. The Income Tax Act categorizes taxpayers into two groups based on their legal structure:
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A corporate assessee is an entity registered as a company under the Companies Act, 2013, or any previous company law. This category encompasses various types of companies, such as private limited companies, public limited companies, and one person companies. A corporate assessee treat as a distinct legal entity separate from its shareholders and it is subject to separate taxation apart from its shareholders.
In contrast, a non-corporate assessee refers to an entity that is not legally registered as a company under the Companies Act, 2013, or any prior company legislation.. This includes different forms of business entities like sole proprietorships, partnerships, Hindu Undivided Families (HUFs), and Association of Persons (AOPs). In the case of non-corporate entities, the income earned by the entity taxes as the income of the individual or partners, as applicable.
The differentiation between corporate and non-corporate assessee is significant in terms of taxation, as the tax laws and provisions applicable to each category vary. For example, the tax rates for companies differ from those applicable to individuals and certain tax deductions. The exemptions are available exclusively to specific types of taxpayers. So, It is essential for taxpayers to understand their classification as a corporate or non-corporate assessee to ensure compliance with the appropriate tax regulations and to make use of the relevant tax benefits applicable to their category.
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